The plan, dubbed "myMicrosoft," would improve training for managers, clarify internal career paths and increase child care and tuition benefits. New services on the Redmond campus will include dry-cleaning, convenience stores, grocery delivery and upgraded dining options -- such as Wolfgang Puck takeout.

As part of the changes, the company said it would revive the laundered towel service used by employees who shower at work after playing sports and commuting by bike. Its discontinuation two years ago became a symbol for employee frustration with cutbacks.

In addition, Microsoft said it will give top-performing employees an opportunity to receive larger amounts of company stock as part of their compensation. Stock awards to employees are expected to go up 15 percent as a result, the company said.

The "myMicrosoft" initiative "will help us continue to attract, develop and retain great people, drive success and stay competitive," wrote Lisa Brummel, Microsoft's senior vice president of human resources, in a memo outlining the changes.

Microsoft said the cost of the new initiative already has been incorporated into its public financial guidance for Wall Street, but the company didn't detail the expense.

Previous cutbacks in benefits were part of a broader effort to improve Microsoft's profit margins. Microsoft recently experienced a sharp decline in its share price after it disclosed plans to boost spending on research and development next year, surprising Wall Street.

The convenience stores are expected to be added inside existing buildings, where the company already offers dining services to employees. Among other new perks, Microsoft said it is arranging discounts for employees on home services such as yard and pet care.

But the "real key here will be what the rank-and-file employees think of the 'myMicrosoft' changes a year from now," Courtney said. At that point, he said, he wonders if employees will "really think it's instituting a fairer review process and a fairer opportunity to get rewarded for the work that they do."

Brummel, Chief Executive Steve Ballmer and other senior company executives led the employee "town hall" meeting where the plan was announced. It was closed to outsiders, including media, but some people who were there described the reaction as positive.

The initiative comes on the heels of several setbacks that have reverberated through Microsoft's work force. Most significantly, the company was forced to delay the retail release of Windows Vista, the next version of Microsoft's flagship operating system, until next year.

"I think there are a vocal group of folks who want to make sure that people are being evaluated properly, because slipping a release like Vista and missing Christmas was pretty demoralizing to the team," said industry analyst Michael Silver, research vice president at Gartner Inc.

Some people at the company seem to "want to make sure that Microsoft is going to be measuring performance and motivating people in right ways," Silver said.

In addition, in high-profile areas such as Internet search, Microsoft has found itself struggling to catch up to online rivals such as Yahoo! and Google, with which it competes for top talent in the field of computer science.

Employees' frustration has become public as they have voiced their opinions on Weblogs and online forums. After the company discontinued the towel service two years ago, one employee wrote derisively that the move was "certain to save every MSFT shareholder $.0001."

Not everyone is sympathetic to their views. Previous complaints by Microsoft employees about benefit cuts have drawn vehement criticism from some of the company's stockholders, particularly Boeing employees who own Microsoft shares.

Among employees, Microsoft's performance review system has been a lightning rod for criticism.

"I'd love our review and compensation system to be so straightforward and fair that it just fades into the background of everyday worklife," wrote the anonymous employee author of the "Mini-Microsoft" blog, in a recent online post.

Under the system announced Thursday, Microsoft will no longer categorize employee performance in a forced distribution, or curve, giving managers more flexibility. In her memo, Brummel wrote that the change will "allow managers and employees to have a more candid discussion about performance."

Brummel spent much of the past year on what was described inside the company as a "listening tour," talking with Microsoft employees to gauge their opinions on issues such as the compensation and review system.